Banks Will Assess Businesses’ Ability to Recover After Shelling

Growing war-related risks are gradually changing the way banks assess businesses applying for loans. Alongside financial indicators, increasing importance is being attached to a business’s ability to continue operating or recover quickly after a potential external shock.

This was reported by Oksana Shulha, Director of the Small and Medium-Sized Business Department at GLOBUS BANK.

Among the factors becoming particularly important when assessing a borrower, she named the geographical location of the business, the concentration of production facilities in one place, the availability of backup power, alternative suppliers and logistics routes, liquidity reserves, and the possibility of insuring property against war-related risks.

At the same time, according to the banker, large-scale missile and drone attacks have not yet caused a systemic deterioration in the quality of the small and medium-sized business loan portfolio.

However, the consequences of a single strike can be critical for an individual business. Damage to a warehouse, equipment or production facilities can quickly reduce cash flow, even for a company that had previously operated steadily and maintained a good credit history.

“There has been no widespread deterioration in the quality of business loans. However, the situation at an individual enterprise can change literally overnight: a direct hit, the destruction of equipment, damage to a warehouse or a prolonged shutdown can sharply reduce cash flow and make loan repayments more difficult. A business may have orders, customers and a good credit history, yet suddenly lose part of its production capacity. That is why it is important today to assess not only a business’s potential earnings, but also how quickly it can recover after an attack,” — the banker emphasised.